(The Foreign National Debt Interest payments did
Argentina in, not overspending.)

by Ray Auxillou

There is a brand new study out, on the economic
collapse in Argentina. It concludes that interest
payments on the Foreign National Debt caused the
economic collapse of Argentina.

The study by the Center for Economic and Policy
Research, a think tank in Washington, copied somewhat
on our think tank on Belize; the Belize Development
Issues, has researched and shown that in the last seven
years of Argentina, the primary government
spending-funding for salaries, government programs and
operations was essentially FLAT, but interest payments
on the government debt rose threefold.

Interest rate hikes in the USA started about 1994 and
the continual shocks from devaluations, in Mexico in
1994, in Asia in 1997, in Russia in 1998 and Brazil in
1999, drove Argentina's debt service from $2.9 Billion
in 1993 to $9.7 Billion in the year 2000.

The study was done by economist Mark Weisbrot, and
economist Dean Baker. These two claim in the Miami
Herald article today March 24th., 2002 that therefore
Argentina was not responsible for what happened to
their economy.

This study is one of many trying to explain why Latin
America's highest per capita income, which was
continuously applauded for its economic management by
Washington and Wall Street, ended up a basket case. The
article was written by Jane Bussey.

I think it is interesting that they identified the
interest payment spiral as being the straw that broke
the camels back. But to claim, world wide shocks, in
Mexico, Brazil, Asia and Russia created the conditions
for the economic collapse from the interest payment
spiral is rather naŒve and ludicrous. If one upholds
this typical politicians rhetoric, coming from lousy
economists, then there is no ultimate personal
responsibility in the world? Nor does the argument hold
water with me, as Switzerlands debt and interest
payments caused them no equivalent problems during the
same period, for comparison. Indeed, for most of that
same period, Belize also was back then, in good
economic shape, at the time. The world situation and
Belizean International Foreign Debt was manageable.

These think tank economists can claim it was world
conditions and they can claim it was interest rates
spiraling upward. An Argentinian government that
borrowed and did not plan, or allow for such
contingencies were plain stupid, in my opinion. When
you borrow and you accept fluctuating interest rates,
you need to plan for a reversal in interest rate
direction.

Definitely it was the DEBT TRAP, that busted
Argentina! On that I will agree! But the claim that
government ovespending did not cause the problem is a
bit nonsensical. If you don't overborrow, you cannot
overspend. If you don't overborrow, you do not have an
interest rate fluctuation problem. This was plain and
simple in my view, poor fiscal management and poor
economic political policies.

Is there a lesson for Belize here? Sure is! Manage
our economy frugally and put legislative restrictions
on how much, ANY future Belizean Government can borrow.

I personally prefer New York Stock Exchange proven
successful company debt load ratios. In the case of
Belize with an average revenue income of $360 million,
that would be a steady 12% or outstanding Foreign Debt
of $43,200,000 is the benchmark for average Belizean
International Loan Debt and 20% should be the maximum
legal legislated ability of any Belizean future
government can borrow up to. In this year's case, a
maximum of $72 million Belize currency, or $36 million
USA foreign currency.

Since we currently owe between $1 billion and $2
billion Belizean currency, a mandatory FREEZE by
legislation should go on all FOREIGN BORROWING, until
the Belizean Foreign Debt gets back to 12 % of the 5
year average of government annual revenues. THAT is
sensible successfully proven PRUDENT fiscal management!

I think the lesson from Argentina is; that
legislation has to be in place to FREEZE international
borrowing by ratios, or percentage formulas. No matter
which political party is in power. You can't trust
human nature to do the sensible thing.